ACCT1022 Chapter Notes - Chapter 1: Income Statement, Marginal Cost, Sunk Costs

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18 Jan 2017

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Cost: the sacrifice made, usually measured by the resources given up to achieve a particular purpose: cost can have different meanings in different contexts, different cost concepts and classifications re used for different purposes. Expense: the cost incurred when an asset is used up or sold for the purpose of generating revenue. Product cost: cost assigned to goods that were either purchased or manufactured for resale: used to value the inventory of manufactured goods or merchandise until the goods are sold. Cost of goods sold: in the period of the sale, the cost of the merchandize. Inventoriable cost another word for product cost since the product cost is stored as the cost of inventory until the goods are sold. Selling and administrative costs are always period costs on any type of company"s income statement. Operating expenses: what service industry firms refer to the costs of producing services. Raw material inventory: includes all materials before they are placed in production.

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1) Costs of Goods Sold of a manufacturing represents the costs related to building a product that are expensed when it is sold. To determine Costs of Goodsâ Sold, three formulas where used representing the three different categories of inventory. Which schedule is based on work in processâ inventory?

A.Direct Materials Used

B.Income Statement

C.Cost of Goods Sold

D.Costs of Goods Manufactured

2) The value chain describes the costs associated with making a product. What box captures the costs to build theâ product; the inventory related costsâ ("inventoriable productâcosts") that is used for reporting inventory on the balance sheet until it is sold and then is reported as Costs of Goods Sold on the incomeâ statement?

A.Marketing

B.All of them

C.Production or Purchases

D.Reserachâ & Development

silvercrow398

Statement of Cost of Goods Manufactured for a ManufacturingCompany

A payment of cash (or a commitment to pay cash in the future)for the purpose of generating revenues.Cost data for SanduskyManufacturing Company for the month ended January 31 are asfollows:

Inventories	January 1	January 31
Materials	$175,500	$154,440
Work in process	121,100	106,560
Finished goods	91,260	103,470

Direct labor		$315,900
Materials purchased during January		336,960
Factory overhead incurred during January:
	Indirect labor	33,700
	Machinery depreciation	20,360
	Heat, light, and power	7,020
	Supplies	5,620
	Property taxes	4,910
	Miscellaneous costs	9,130

a. Prepare a cost of goods manufacturedstatement for January.

Sandusky Manufacturing Company
Statement of Cost of Goods Manufactured
For the Month Ended January 31
Indirect laborMachinery depreciationSuppliesWork in processinventory, January 1			$
Direct materials:
Machinery depreciationMaterials inventory, January1SuppliesWork in process inventory, January 31	$
Indirect laborProperty taxesPurchasesWork in process inventory,January 31
Cost of materials available for useLess work in processinventory, January 31SuppliesWork in process inventory, January31	$
Indirect laborMaterials inventory, January 31MiscellaneouscostWork in process inventory, January 31
Cost of direct materials used in productionLess work in processinventory, January 31Materials inventory, January 1Totalmanufacturing costs		$
Direct laborIndirect laborMachinery depreciationSupplies
Factory overhead:
Indirect laborMaterials inventory, January 1Materialsinventory, January 31Purchases	$
Direct laborMachinery depreciationPurchasesWork in processinventory, January 31
Direct laborHeat, light, and powerMaterials inventory, January1Work in process inventory, January 31
Direct laborMaterials inventory, January1PurchasesSupplies
Materials inventory, January 31Property taxesPurchasesWork inprocess inventory, January 31
Direct materialsMiscellaneous costsPurchasesWork in processinventory, January 31
Total factory overhead
Total manufacturing costs incurred during January
Total manufacturing costs			$
Cost of materials available for useDirect materialsMaterialsinventory, January 31Work in process inventory, January 31
Cost of goods manufactured			$

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b. Determine the The cost of finished goodsavailable for sale minus the ending finished goods inventory.costof goods sold for January.

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1. Sydney's Barbecue reported the following information:

Sydney's Barbecue
Period Ending December 31, 20XX

Manufacturing costs	$5,400,000
Units manufactured	$54,000
Beginning inventory in Units	$ 0

Note: 45,600 units sold during year at $300 per unit

What is the amount of ending finished goods inventory for theperiod ending December 31, 20XX?

	$860,000
	$830,000
	$840,000
	$850,000
	$820,000

2.Net income reported under absorption costing will exceed netincome reported under variable costing for a given period if

production equals sales for thatperiod.

variable overhead exceeds fixedoverhead for that period.

production exceeds sales for thatperiod.

sales exceed production for that period.

A company manufactures wallets. Last month's costs were aslisted below:

Direct materials	$246,000
Direct labor	$175,000
Manufacturing Overhead	$73,000

What were the conversion costs for the month?

$248,000

$494,000

$421,000

$246,000

4. Which of the following are classified as manufacturingoverhead?

Indirect labor and indirectmaterials

Direct materials and directlabor

Factory rent and direct labor

All materials

5.Baxter Company produces Frisbees using a three-step sequentialprocess that includes molding, coloring, and finishing. At whatstage would the sets be allocated Manufacturing Overhead?

When the Frisbees are in WIPInventory-Coloring

When the Frisbees are in WIPInventory-Finishing

When the Frisbees are in WIPInventory-Molding

All of the above

6.Which method are managers using when they use their judgmentto classify costs as variable, fixed, or mixed?

Low-high method

Regression analysis

Account analysis

High-low method

7.Which of the following is not a way in which management canuse job cost information?

Determining the balance in rawmaterials inventory

Preparing the financialstatements

Assessing and comparing theprofitability of each product type

Using the cost information in determining the bid price forcustom orders

8.A factory janitor's wages would be classified as _________when determining the cost of a manufactured product.

an indirect cost

a period cost

a direct cost

none of the above

Tall Timbers reports the following data for its first year ofoperation:

Work in process inventory, beginning	$ 0
Work in process inventory, ending	$50,200
Manufacturing overhead	$25,400
Direct materials used	$7,700
Direct Labor	$60,000
Finished goods inventory, beginning	$ 0
Finished goods inventory, ending	$20,000
Cost of goods manufactured	$42,900

What is the cost of goods sold?

$22,900

$76,000

$73,100

$42,900

10.

A deodorant manufacturer offers the following information:

WIP Inventory, January 1	0 units
Units started	33,600 units
Units completed and transferred out	11,200 units
WIP Inventory, December 31	22,400 units
Direct materials	$276,480
Direct labor	$585,000
Manufacturing Overhead	$328,920

The units in ending WIP Inventory were 60% complete formaterials and 40% complete for conversion costs.

On December 31, what are the total equivalent units for directmaterials?

47,040

33,600

20,160

24,640

11. How is the cost of indirect materials used in the factoryrecorded?

Credit to Raw Materials Inventoryaccount

Credit to Manufacturing Overheadaccount

Credit to Direct Materials Expenseaccount

Credit to Work-in-Process Inventory account

12. XYZ uses job costing. Actual manufacturing overhead for theperiod is $20,300 while allocated manufacturing overhead is$18,200. What entry will close the manufacturing overheadbalance?

	Debit the Cost of Goods Soldaccount and credit the Finished Goods Inventory account for$2,100.
	Debit the Manufacturing Overheadaccount and credit the Work-in-Process account for $2,100.
	Debit the Cost of Goods Soldaccount and credit the Manufacturing Overhead account for$2,100.
	Debit the Manufacturing Overhead account and credit the Cost ofGoods Sold account for $2,100.

ACCT1022 Chapter Notes - Chapter 1: Income Statement, Marginal Cost, Sunk Costs

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